Can rental renewal fees be avoided?

In a year there are as many as 1 million rental contracts with renewal fees in existence across Japan. But, as a tenant, do you have to pay these renewal fees? And if you do, are the fees reasonable?

The typical renewal fee varies by region. In Tokyo and Kanagawa, they are equivalent to one month’s rent (plus any administration fees) paid upon contract renewal, which is usually every two years. In this scenario, the renewal fee spread across the two years of rent amounts to paying an additional 4% extra rent each month, so it is important to allocate for this future expense.

MyNavi interviewed Tomoko Sugaya from Century 21 Alto Jyuhan to find out how renters can avoid this extra expense.

Cases where you have no choice but to pay the renewal fee

Renewal fees are a customary practice, but there is no law that requires renewal fees to be included in a rental contract. However, if the tenant signed a contract that included a clause requiring them to pay a renewal fee, this is legally binding and the tenant is obligated to pay upon contract renewal.

What if you do not want to pay?

BEFORE signing the contract and as part of your negotiations, request that the renewal fee clause be removed. If you notice that the renewal fee charged to you is higher than the market rate in the area, there may also be a chance for you to negotiate to have it reduced. You can research the average renewal fees in your area through local real estate agents and the internet.

If you have already signed a rental contract that requires you to pay a renewal fee, the only way to avoid paying is to move out at the end of your lease or take your landlord to court.

When renewal fees are not necessary

If you are renting a property under a fixed-term lease, there are no renewal fees as the contract is not renewable. The length of the term is usually decided by the landlord. Sometimes the owner has been transferred to another city or overseas, so they choose to rent out their home for a 5-year fixed term. Over 5 years, a tenant on a renewable lease would normally have to pay renewal fees twice, so there is a saving to be made by choosing a fixed-term contract. Unfortunately this type of contract is usually only seen with family-type apartments or homes, and very rarely for smaller 1-bedroom or studio apartments.

Source: MyNavi, September 6, 2012.
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